Archives for September 2016

Functional Capacity Evaluation – A Workers Comp Mystery

The Functional Capacity Evaluation (FCE) is one of the great Workers Comp mysteries. All claims people talk about it. Most doctors want it. Some say it is too expensive to use on files. I have also heard the same comments concerning rehabilitation nurses.

However, the FCE can be a great Risk Management tool to ensure a great return to work and to avoid the employee reinjuring themselves the first day back on the job. Reading an FCE is painful at best. The conclusion section is fertile ground for such things as maximum effort, restrictions, etc.

What actually is a Functional Capacity Evaluation? The definition of an FCE is according to Wikipedia:

A functional capacity evaluation (FCE) is a set of tests, practices and observations that are combined to determine the ability of the evaluated to function in a variety of circumstances, most often employment, in an objective manner. Physicians change diagnoses based on FCEs.

That definition was a little too vague, let us try another one that is more aligned with Workers Compensation. Job Ready Services out of Raleigh North Carolina –

A functional capacity evaluation (FCE) is ordered when a doctor is looking for a snapshot of what a person can do functionally at that point and time. How much can the injured worker lift? Can he or she climb a ladder? Can the individual pull, push, squat, walk, stand or sit for certain periods of time?

The employer asks the doctor to assign work restrictions when a worker is injured, and the doctor can either do a general statement such as “most people with this injury can do …” or the doctor can order an FCE to determine what the worker can or can’t perform. Then, the restrictions given to the employer will be based on objective data for that individual and not a generalization.

Workers Comp Endorsements Are Worth a Look

The Endorsements section of a Workers Comp policy is not actually a section. Endorsements on any policy including Workers Comp are always at the end. Why?

A policy may be endorsed many times. I have seen a few that were endorsed almost 200 times. However, it was a huge policy on a very large national company which had stores in every state.

Every policy has the same section or parts. One can memorize them by spelling out DICEE. The parts are Declarations, Inclusions, Conditions, Exclusions and Endorsements. The Declarations or Dec Page is what most insurance workers consider the most important part.

The Endorsements are at the end of the policy as they are additions to the policy. Trying to alter the internal parts of the policy would cause so much confusion that a flowchart would be needed to keep track of the changes.

The Endorsement part of the policy may not be produced at the time of inception. The Endorsements are usually added after a policy begins unless they are used to alter the policy at the beginning.

The Endorsements may come by mail or email as the policy is endorsed each time. These communications – whether from an agent or directly from the insurance company must be monitored very carefully.

One of the reasons is that anything in the policy may be changed by Endorsement – even the Dec Page which contain your original policy premiums.

I have a policy sitting on my desk which has been endorsed two times resulting in over a 100% increase in the policy premiums even before the premium audit.

Many endorsements are not that important. However, who will decide which ones are important or not? Call your agent if your Workers Comp policy is endorsed to ask your agent any questions. The endorsement should not be filed away and then ignored until later.

California AB 1643 Warning Memo From WCAN

The new California AB 1643 House Bill has caused quite a bit of controversy. WCAN has produced a reminder to contact Governor Brown to veto the bill. The bill summary is below.

Apportionment is basically assigning a permanent disability rating to only the new injury and to not allow the rating of previous injuries or conditions. Many states have the same type of rules/law on not rating old injures or conditions.

WCAN (Workers Compensation Action Network) produces the best charts and graphs in the Workers Comp world. Their California AB 1643 memo is here.

A similar attack on apportionment occurred a few years ago. Governor Brown’s Veto of AB 305 covered the same ground but from a different angle.

An act to amend Section 4663 of, and to add Section 4660.2 to, the Labor Code, relating to employment.

Will Governor Brown veto California AB 1643? Only time will tell, however he has vetoed similar bills.

LEGISLATIVE COUNSEL’S DIGEST

>Existing workers’ compensation law generally requires employers to secure payment of workers’ compensation, including medical treatment, for injuries incurred by their employees that arise out of, or in the course of, employment. An employer is liable only for the percentage of the permanent disability directly caused by the injury arising out of, and occurring in the course of, employment.

Existing law requires apportionment of permanent disability to be based on causation, and a physician who prepares a report addressing the issue of permanent disability due to a claimed industrial injury is required to address the issue of causation of the permanent disability. The physician is required to make an apportionment determination by finding the approximate percentage of the permanent disability that was caused by the direct result of injury arising out of and occurring in the course of employment, and the approximate percentage of the permanent disability that was caused by other factors both before and subsequent to the industrial injury, including prior industrial injuries.

This bill would prohibit apportionment of permanent disability, in the case of a physical injury occurring on or after January 1, 2017, from being based on pregnancy, menopause, osteoporosis, or carpal tunnel syndrome. The bill would also prohibit apportionment of permanent disability, in the case of a psychiatric injury occurring on or after January 1, 2017, from being based on psychiatric disability or impairment caused by any of those conditions.

The bill would also provide, notwithstanding any other law, for injuries occurring on or after January 1, 2017, that the impairment ratings for breast cancer and the aftereffects of the disease, known as sequelae, shall in no event be less than comparable ratings for prostate cancer and its sequelae.

Article provided by James Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com

WCIRB Mod Talk Sessions for 2016

The WCIRB Mod Talk webinars are very informative and enlightening on the changes that are occurring with the new Variable Split points.

The WCIRB – Workers Compensation Insurance Rating Bureau- is the work comp rating bureau for California employers. They have always been (except one person) very nice, professional, and hospitable to me in all my dealings with the bureau.

The variable split points are now centered on Expected Loss Ratios. You can find the slides and webinar recordings for the WCRIB Mod Talk webinars here.

I had decided to listen to the Q&A part of the webinars very closely. As with most rating bureau webinars, the listener questions is where the “rubber meets the road.”

Please remember these are my individual notes, so I could have missed something or accidentally over-embellished a point. I listened to all the sessions yesterday.

The recordings were listened to once. I wanted the feel of the notes to be more “live”. No second pass was made at the recordings.

Questions and Answers

Please note these are raw notes from the WCIRB Mod Talk Q&A sessions at the end of each webinar. The WCIRB Mod Talk presenters performed well overall.

Employer Size

WCIRB sees company as small 10,000 to 15,000 premium Medium 50,000

Extremely small company is not subject to rating plan less than $5,000 premium

Rating Calculator

New Rating Calculator in June will not handle complex situations such as subrogation

NCCI has pre-populated, not WCIRB

2015 Change- Limit to .25 swing due to one claim for companies with just one big l loss – still in effect

Simplify plan in future

Current formula is complex 8 variable

WCIRB not abandoning the 8 variable measure

Eliminate credibility in future?

Dramatic simplification in future

First Aid Issue

WCIRB looking at First Aid issue

Avoidance of reporting small claims

New Mod calculation – Increase potential to not report claims?

Why no phase in period (like NCCI)?

Most employers would see .02 change at most

Will handle all incoming questions by emails….. <<<WCIRB has laways answered every email or phone call from me.

Premium neutral plan? Yes.

April webinar –

Uncooperative employers for audits will have claims exposure calculated into the X-Mod without the offsetting payroll figures<<<ouch!!!

How does unaudited payroll affect the split point threshold – unaudited payroll

Will the 25% limit on one claim from a loss free rating still exist? 25% limit will not apply if uncooperative employer

If an employer is uncooperative for two years, how would that work? Only one year of payroll would be used out of three years

Insolvent insurers – What happens if there is no unit statistical report provided by insurer? No new changes

Time period used in X-Mod calculations- can smaller employers use longer experience periods to calculate X-Mod (5-8 Years?) Did not really make sense to do that

May webinar –

Simplified formula not in force on 2017 , possibly 2019 if no fine tuning needed to program

Are all class codes included not just governing class code? All class codes

Excess loss presently handled? Confusing answer ….

July Webinar

Experience is a zero sum game- most response to new variable split points have been positive

There will be some winners and losers in the new system

The X-Mod estimator may or may not be 100% accurate if the data input is off

99% accuracy on the X-Mod estimator

The estimator requires group of claims of 5,000 or greater be broken into individual claims, best to list all claims individually

Questions came in that the estimator was not working correctly(?)

September Webinar was postponed.

The WCIRB Mod talks are easily accessible online. If you have any CA WC companies or interests, it may be worth the three hours to listen to the webinars. If not, the slides are there as a quick-look at the upcoming changes.

New Workers Comp Hard Markets May Come From China

The Workers Comp hard markets of old have almost a fairytale connotation. Many insurance workers and press may have only seen soft markets. Workers comp hard markets still exists today. It is sectional or just hardening for certain markets.

The trucking and temporary personnel agency markets are but two that have felt the searing pain of no carrier willing to write in those marketplaces. Carriers are risk-averse most of the time as there is limited profit in WC insurance.

China’s financial market turmoils have been the subject of more than one article written by me. Following the prior link to the article written last year will explain it more fully.

Earlier this week a financial red light started flashing for the China economy. A banking crisis in China would have far reaching effects and would affect the insurance markets. One reason for this effect is the amount of investment China has made in the American financial markets including insurance.

Has anyone heard of the Bank for International Settlements (BIS)? According to the linked article, they are the number one worldwide financial watchdog.

The BIS posted to its quarterly report that China’s credit to GDP gap had:

Reached 30.1- the highest to date

In a different league altogether from any other major country tracked by the institution

Significantly higher than the scores in East Asia’s speculative boom in 1997 or in;

The US subprime bubble before the Lehman crisis.

The comparison to the subprime bubble should raise more than a few eyebrows. Hold onto to your office chairs, it may be a bumpy ride.

Is There Really A Workers Comp Tax?

A Workers Comp tax is something that many people in Human Resources and Accounting Departments have to consider overall.

The subject of a Workers Comp tax comes up each year as today is the end of our tax filing season. I always try to write something on premiums being viewed as a tax this time of year. The postman just picked up all of our tax forms (whew!).

Are Workers Comp premiums a tax? The main consideration is how the employer views the payouts. It is shocking to me (hence the title) that employers still just cut the check with so many areas of assistance available.

If a company or organization considers premiums just a cost of doing business, then it is nothing more than a percentage of payroll tax. This is a big mistake and one of the reasons this article and blog have been written for almost 10 years.

One of our old slogans is/was “Stop just cutting checks.” At least read your Workers Comp policy and premium audits as a beginning to analyzing how your company is faring with your WC budget.

The simplest way to start reducing Workers Comp is with a general safety plan. A claim is a loss. Once a claim occurs the only strategy left is to reduce the costs, which we have specialized in for over 20 years. The old and true saying is a claim that never occurs will always be the largest cost reduction – plain and simple.

Your Third Party Administrators or carriers usually have an endless amount of information on cost savings. If not, there are free organizations such as the North Carolina Safety Conference that provide free or low cost safety training.

Other Incentives For Safety

One of the main incentives to cut costs with a safety program is the Schedule Rating Factor. An example of a Schedule Rating chart is here. Notice many of the cost reductions are directly related to safety.

A Workers Comp tax does not exist on paper. It usually exists in boardrooms, C-Level executive offices, and in the safety and risk management departments.

Oklahoma Opt-Out Insurance Takes Major Hit

The fans of Oklahoma Opt-Out Insurance were dealt a five fingered death punch. The Oklahoma Supreme Court just wiped out any semblance of Oklahoma Opt-Out Insurance by ruling it as unconstitutional.

The Oklahoma Workers Comp Commission had already said NO to the opt out option earlier this year.

Will this cause an abrupt increase in Oklahoma’s Workers Comp rates? That is doubtful as the Oklahoma Opt-Out Insurance market was not that significant when compared with the overall Oklahoma WC insurance marketplace. Even if the market was significant, the effect on rates would likely be minimal.

Actually, I am always a proponent of any alternative sources of Workers Comp coverage. One of our core businesses is to aid in finding alternative sources if the usual marketplaces (self insured, large deductible, first dollar, etc.) do not serve the client well.

There are many sources of WC insurance if one just applies oneself to researching the different marketplaces before the last month of the policy. Do not take No for an answer is your best creed here.

In football terms, the Opt-Out market lost 35 – 14 as the Supreme Court Justices ruled 7 – 2 in favor of opting out of opt out insurance.

The case that got the ball rolling to end opt out was Vasquez v. Dillards. Dillards is a very popular department store in Oklahoma. How would I know? I actually grew up there in the oilfields.

Deal Breaker?

According to a very controversial article by ProPublica on Opt Out “Dillard’s employees had to report injuries by the end of the workday and could only appeal in writing to a committee made up of people picked by the company. ”

The appeals going to people picked by the company may not have been the deal-breaker. The requirement to report the injury by the end of the day was really the only part of the article that I found to possibly be excessive.

At the 2016 WCRI Conference, there were two main session on this very topic. For WCRI to devote this much time to one certain subject indicated the seriousness of the issue.

Will the case be appealed to the US Supreme Court? One has to wonder if it would even be heard as the US Supreme Court has been very reluctant to consider WC cases. What will the Oklahoma Opt out insurance market do now?

Workers Comp Expert Witness – A Niche’ ?

Being a Workers Comp expert witness over the years has taught me many very interesting experiences. I thought I would cover a few of those which provided a lesson.

Memorization

One cannot lull themselves into thinking that you can memorize the WC statute, rules, Rating Bureau information and other information. The path to driving yourself crazy is to try to memorize all of it. There just no way to store all that information and be a successful workers comp expert witness.

Each State Unto Itself

Each state has established its own very unique set of rules. If one wants to see how independent each state is from each other, just pull up their workers compensation statutes, rules, etc. No two states are alike in all aspects. There are similarities between states but I have yet to see carbon copies.

Rating Bureaus

The NCCI and WCIRB are the two most popular rating bureaus. As with the general WC regulations, there are similarities between each state rated by NCCI. Believe it or not, there are also similarities to the WCIRB ratings and NCCI. NCCI has to check with each state to make sure that any NCCI rules are accepted by the state.

There are some examples in the press of where states have actually rejected NCCI’s ratings. Without the differences between each state, the NCCI rating information and rules would be much smaller.

Multifaceted

Being a Workers Comp expert witness is a multifaceted endeavor. There are many areas that can be considered a niche’ such as:

Agency

Policy

Claims Handling

Ratings

Premium Audits

Self Insurance

Many others

The list can be very lengthy.

The Key

One of the main keys to me in workers comp expert witness is how you dress and act overall. Attorneys assess how you will look to a judge and jury just as much as your knowledge base during a deposition or in any written report. Acting and writing professionally at all times can never be seen as a negative trait.

FMLA ADAAA Work Comp Analysis

The upcoming FMLA ADAAA Work Comp webinar should be an interesting one. The hosts are two of my favorite Workers Comp people- Kimberly George of Sedgwick and Mark Walls of Safety National.

Until today, I had never heard of the ADAAA. The FMLA, of course, is the Family Medical Leave Act. The ADAAA is the Americans with Disabilities Act Amendments Act. Now that is a mouthful.

The September 20th webinar is actually part of the Out Front Ideas series. The webinars in this series have always been informative and worth the time spent attending them online.

According to the email that I received:

“Employment laws related to leave of absence and accommodation also apply to workers’ compensation claims, adding another layer of complexity to an already challenging situation. It is critical for workers’ compensation payers to understand the nuances of federal laws like the Americans with Disabilities Act Amendments Act (ADAAA) and The Family and Medical Leave Act (FMLA) in addition to developing a plan to work closely with employers to protect them from compliance fines, penalties and lawsuits.”

The cost for the FMLA ADAAA Work Comp Webinar is freebies and the number of ports or space is limited.

My Hard FMLA ADA Lesson

When I was in my last professional position, I often presented to schools on how to handle Workers Comp claims from an employer standpoint. I considered it one of my specialties. FMLA was not one of my specialties. A HR manager from one of the school districts raised in hand and asked

“Can you send out the FMLA letter so the out of work time for the leave act will run parallel with the TTD period?” This was when FMLA was just really hitting the books, so to speak. I said that I would not recommend it. I was actually wrong. The HR Director let me know that I was wrong. That was one of my toughest presentations.

The old adage about being prepared for any question when you present in person would have applied to my speech conundrum. The actual answer can be found here in one of the old cutcompcosts.com articles.

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About Me

James J Moore
Raleigh, NC, United States

James founded a Workers' Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L's mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers' Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James's educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.